The most awaited event -- the Union Budget 2016-17 was announced in the Parliament today. According to the budget speech, the budget was built on a transformative agenda with nine distinct pillars, namely:
 

• Agriculture and Farmers’ Welfare (with focus on doubling farmers’ income in five years);
• Rural Sector (with emphasis on rural employment and infrastructure);
• Social Sector including Healthcare ( to cover all under welfare and health services);
• Education, Skills and Job Creation (to make India a knowledge based and productive society);
• Infrastructure and Investment (to enhance efficiency and quality of life);
• Financial Sector Reforms (to bring transparency and stability);
• Governance and Ease of Doing Business (to enable the people to realise their full potential);
• Fiscal Discipline (prudent management of Government finances and delivery of benefits to the needy); and
• Tax Reforms (to reduce compliance burden with faith in the citizenry).

But the biggest focus of this year’s budget was farmer’s interest. Even Prime Minister, Mr Narendra Modi explicitly said so. However this has been subsidised from other sections of the society for perhaps political mileage.

Hence for the aam aadmi (or the common man), amid all the hopes of acche din, there was not many tax sops. It was a mixed bag!

Amongst the expectations the only the one which was honoured was…

Revised deduction under Section 80GG: The deduction under this section was set in the year 1996. The Finance Minister thus proposed to increase the limit of deduction in respect of rent paid under section 80GG from Rs 24,000 per annum to Rs 60,000 per annum, providing relief to those who live in rented houses but who do not receive HRA.

There were positive surprises as well…

Tax relief to the common man
 

• The basic exemption limit was left unchanged although there were expectations that it would increase from Rs 250,000 to Rs 300,000 leaving a higher disposable income in the hand of the common man. But in order to lessen tax burden on individuals with income not exceeding Rs 5 lakh, it is proposed to raise the ceiling of tax rebate under Section 87A from Rs 2,000 to Rs 5,000 providing a relief to 2 crore tax payers in this category who will get a relief of Rs 3,000 in their tax liability.
   
• In order to provide relief to ‘first – home buyers’, the Finance Minister, Mr Arun Jaitley also proposed to give deduction for additional interest of Rs 50,000 per annum for loans up to Rs 35 lakh sanctioned during the next financial year, provided the value of the house does not exceed Rs 50 lakh.
   

EPF rate for new employees
 

• To incentivise creation of new jobs in the formal sector, it has been proposed that 8.33% shall be paid on EPF contribution for all new employees enrolling in EPFO for the first three years of their employment. This has been done with the objective of incentivising the employers to recruit unemployed persons and also to bring into the books the informal employees such as semi-skilled and unskilled workers drawing salary less than Rs 15,000 per month.
   

Benefit for pensioners
 

• Recognising the importance of Pension Funds for the livelihood of senior citizens, it is proposed to make 40% of the retirement corpus accumulated through National Pension System (NPS) tax free on retirement.
   
• On the closure of NPS account referred to under Section 80CCD of the Income-tax Act, 1961 any amount received by the nominee on the death of the employee is proposed to be exempt.
   
• Likewise, for Recognised Provident Fund and Superannuation Funds 40% of corpus is proposed to be tax free for contributions made after 1.4.2016.
   
• In order to encourage purchase of single premium annuity plans, it is proposed to reduce service tax from 3.5% to 1.4% of premium paid. It has also been proposed that the annuity which goes to the legal heir after the death of pensioner will not be taxable.
   

Benefit for investors
 

• In order to provide boost to Sovereign Gold Bond Scheme (issued by Reserve Bank of India), it is proposed that there will be no long term capital gain tax on the Scheme. Further, it is been proposed to provide for indexation benefit at the time of transfer of Sovereign Gold Bonds.
   
• Similarly it is proposed that, interest earned on Deposit Certificates issued under Gold Monetisation Scheme, 2015 and capital gains arising from them shall be exempt from tax.
   
• For rupee denominated bonds it is proposed that any gains arising on account of appreciation of rupee against a foreign currency at the time of redemption of these bonds of an Indian company subscribed by a non-resident be exempt from capital gains tax.
   
• In case of transfer of units under merger or consolidation of plans of a mutual fund scheme shall be exempt from capital gains tax.
   
• In case of demerger or amalgamation of a company, the acquisition of shares by an individual or HUF shall not attract tax liability under section 56(2)(vii) of the Income-tax Act.
   

However, along with the benefits which are been proposed, here are a few negatives...

Tax on Dividend Income
 

• In an attempt to bridge income inequality a rationale has been formed that persons with higher income can bear higher tax cost. Thus, it is proposed that in addition to Dividend Distribution Tax (DDT) paid by the companies, tax at the rate of 10% of gross amount of dividend will be payable by the recipients i.e. individuals, HUFs and firms receiving dividend in excess of Rs 10 lakh per annum.
   

Services to get more expensive
 

• Also, the government has imposed a Krishi Kalyan Cess @0.5% on all taxable services. Hence while you may like to dine out or travel for leisure, don’t over indulge, as you will end up paying money out of your pocket as tax.
   
• Excise duty has been hiked on cigarettes. So refrain from smoking; because it can not only be damaging for your health but also your wealth.
   

To keep your finances in pink in the long term, ensure you are saving and investing wisely in wealth creating investment avenues while you endeavor to achieve many goals in life. Be a smart and a wise investor in your journey to wealth creation; don’t depend only on union budgets.
 

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